Stimulus package has tax breaks for parents of college students
on Tuesday,April 14,2009 21:04
As the tax filing deadline approaches, one expert has offered advice on how parents who help finance their children''s education can claim a new tax credit provided for in the stimulus package.
Writing for Forbes.com, Troy Onink, a college funding consultant, singles out the American Opportunity Education Tax which, unlike earlier tax credits, can also benefit middle-income families.
Onink stresses the new tax credit, which is an expansion of the Hope credit, does not replace the existing $2,000 Lifetime Learning tax credit or the $4,000 above-the-line deduction for tuition and fees.
However, families can only claim one of these breaks per student, and -Onink suggests - most will benefit from opting for the expanded Hope.
That is because the new credit reduces the federal tax bill up to $2,500 whereas a $4,000 deduction, which reduces taxable income, can save families at most $1,400 in federal tax.
Finally, the tax benefit is available to students at nearly all accredited public, nonprofit and private higher education institutions provided they are enrolled at least part-time.
Passed on February 13, the economic stimulus package also includes enhancements to Section 529 college savings and raises the minimum level of the Pell grant from $4,731 to $5,350 starting July 1 and to $5,550 in 2010-11.
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